SINGAPORE: Singapore’s central bank, the Monetary Authority of Singapore (MAS), eased its monetary policy on Friday (Jan 24), making its first adjustment since October 2022, a move expected by most analysts.
The central bank announced that it will “slightly” reduce the slope of the Singapore dollar nominal effective exchange rate (S$NEER) policy band. Meanwhile, there will be no change to the width of the policy band or the level at which it is centred.
MAS explained that the adjustment supports a modest and gradual appreciation of the S$NEER policy band to maintain medium-term price stability.
It said, “MAS will closely monitor global and domestic economic developments and remain vigilant to risks to inflation and growth,”
The move followed market expectations after Singapore’s core inflation, excluding accommodation and private transport, fell below two per cent for the second month in December, as reported by The Business Times.
MAS lowered its 2025 core inflation forecast to one to two per cent, down from the previous 1.5 to 2.5 per cent. The central bank noted that core inflation has “moderated more quickly” than expected and will stay below two per cent this year, reflecting the return to low and stable underlying price pressures in the economy.
However, the headline inflation forecast for 2025 was left unchanged at 1.5 to 2.5 per cent. MAS said accommodation inflation is expected to slow, which would partly offset an anticipated rise in private transport costs.
Singapore’s economy is also expected to see slower growth in 2025 after a stronger-than-expected performance in the second half of 2024. MAS said the country’s output is likely to grow close to its potential this year.
Inflation data for 2024 showed core inflation averaged 2.7 per cent, staying within the official forecast range of 2.5 to 3 per cent, according to data from the Singapore Department of Statistics on Thursday.
Headline inflation for the year was 2.4 per cent as December’s core inflation dropped to 1.8 per cent from 1.9 per cent, the lowest since November 2021, while December’s headline inflation remained steady at 1.6 per cent.
On Monday, Bloomberg reported that most analysts believe the MAS will likely adjust its policy in 2025. Many had predicted the central bank’s decision to change its policy on Jan 24, though some expected the adjustment to be made later in the year after it becomes clear how US President Donald Trump’s return to office affects the economy. /TISG
Featured image by Depositphotos (for illustration purposes only)